ITO 12(3) , Mumbai V. LAB DEVICE INDIA PVT LTD, Mumbai

ITA 5809/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3481 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY PRATAP SINGH
• Keywords: Bogus purchase; Reason to believe; Set aside
• Section: 271(1)(c); 143(3); 142(1); 133(6); 143(1); 250; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 5809/MUM/2019 (A.Y: 2011-12) ITO 12(3) RNO. 224, 2 ND FLOOR, AAYAKAR BHAVAN, MK ROAD, MUMBAI 400020 VS. LAB DEVICE INDIA PVT LTD., SHOP NO. 112, PLOT NO. 39, 1 ST FLOOR, ATLANATE ESTATE, HANUMAN TEKDI ROAD, GOREGAON(E), MUMBAI ./ ./ PAN/GIR NO. : AABCL0636K APPELLANT .. RESPONDENT APPELLANT BY : SHRI AJAY PRATAP SINGH, DR RESPONDENT BY : SHRI RAJESH KOTHARI, AR DATE OF HEARING 30 .0 3 .2021 DATE OF PRONOUNCEMENT 01 .0 4 .2021 / O R D E R PER PAVAN KUMAR GADALE, JM: THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 20, MUMBAI, PASSED U/S. 271(1)(C) AND 250 OF THE INCOME TAX ACT, 1961. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO 580 9/MUM/2019 LAB DEVICE INDIA PVT LTD., MUMBAI - 2 - 1 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE 14. CIT (A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961, OF RS.50,455/- WITHOUT APPREC IATING THE FACTS THAT THE ASSESSEE CLAIMED BOGUS PURCHASES IN ITS RETURN OF INCOME AND THUS FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961'. 2 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT IS REQUESTED TO ENTERTAIN THIS APPEAL THOUGH THE TAX E FFECT IS BELOW THE MONETARY LIMIT PRESCRIBED IN THE CBDTS CIRCULAR NO. 17/2019 DATED 08.08.2019 READ WITH CIRCULAR NO.3/2018 DATED 11.07 .2018 AS AMENDED ON 20.08.2018 AS THE CASE FALLS IN THE EXCE PTION PROVIDED IN PARA 10(E) OF THE SAID INSTRUCTION IN AS MUCH AS TH E ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES IN TH E NATURE OF LAW ENFORCEMENT AGENCIES, NAMELY, SALES TAX AUTHORITIES '. 3 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED'. 4 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY'. 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF DEALERSHIP OF TILES, SANITARY WARE, BATHROOM FITTINGS, ACCESSORIE S AND BUILDING MATERIALS AND FILED THE RETURN OF INCO ME FOR THE A.Y 2011-12 ON 29.09.2009 DISCLOSING THE TO TAL INCOME OF RS. 6,75,200/- AND THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS RE-OPENED U/S 147 OF THE ACT, THE A.O. HAS RECEIVED THE INFORMATION FROM THE SALES TAX & DGIT (INV) WING, MUMBAI THAT THE ASSESSEE HAS ITA NO 580 9/MUM/2019 LAB DEVICE INDIA PVT LTD., MUMBAI - 3 - OBTAINED BOGUS PURCHASE BILLS FROM EIGHT PARTIES AGGREGATING TO RS. 27,21,377/.-THEREFORE, THE A.O H AS REASON TO BELIEVE THAT, THE INCOME HAS ESCAPED ASSESSMENT AND ISSUED NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY, THE NOTICE U/S 142(1) OF THE ACT WAS ISSUED. IN COMPLIANCE THE LD.AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND SUBMITTED THE DETAIL S. THE A.O CONSIDERED THE MATERIAL ON RECORD AND OBSERVED THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE TRANSACTION OF PURCHASES. FURTHE R THE A.O HAS ISSUED NOTICE U/S 133(6) OF THE ACT ON THE PARTY, TO CROSS VERIFY THE CLAIM OF THE ASSESSEE. B UT THE SAID NOTICES WERE RETURNED BY THE POSTAL AUTHORITIES. HENCE, THE A.O DEALT ON THE DISPUTED ISSUE AND MADE ADDITION OF THE BOGUS PURCHASES O F RS.27,21,377/- AND ASSESSED THE TOTAL INCOME OF RS. 33,96,580/-/-AND PASSED THE ORDER U/S 143(3) R.W.S 147 OF THE ACT ON 29.01.2016 SUBSEQUENTLY, THE A.O HAS INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE A.O RELIED ON THE FINDINGS IN THE SCRUTINY ASSESSMENT AND THE SUBMISSIONS MADE BY THE ASSESSEE IN THE COURSE OF HEARING AND IT WAS MENTIONED THAT IN QUANTUM APPEAL AGAINST THE ADDITION OF BOGUS PURCHASES OF RS. 27,21,377/- THE ITA NO 580 9/MUM/2019 LAB DEVICE INDIA PVT LTD., MUMBAI - 4 - CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE EXTEN T OF GROSS PROFIT @6% WHICH WORK OUT TO RS1,63,283/-. ON PERUSAL OF THE FACTS AND EXPLANATIONS, THE A.O WAS NOT SATISFIED WITH THE REPLY AS THE ASSESSEE HAS INDULG ED IN OBTAINING THE BOGUS PURCHASE BILLS AND THEREFOR E LEVIED PENALTY OF RS.50,455/-AND PASSED ORDER U/S 271(1)(C) OF THE ACT DATED 31.03.2018. 3. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A), THE CIT(A) CONSIDE RED THE GROUNDS OF APPEAL, FINDINGS OF THE A.O AND THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT THE A.O HAS MADE ADDITION OF 100% BOGUS PURCHASES IN THE SCRUTINY ASSESSMENT U/SEC143(3) R.W.S SEC147 OF THE ACT AND WHEREAS, THE LD.CIT(A) HAS RESTRICTED THE ADDITION BY ESTIMATING GROSS PROFIT/INCOME @6%.BUT THE A.O HAS LEVIED THE PENALTY U/SEC 271(1)(C) OF T HE ACT ON ESTIMATED INCOME. THE CIT(A) DEALT ON THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT AND RELIED ON THE COORDINATE BENCH OF HONBLE TRIBUNAL AND THE HONBLE HIGH COURT DECISIONS AND OBSERVED THAT NO PENALTY CAN BE LEVIED ON ESTIMATED INCOME AND DIRECTED THE A.O TO DELETE THE PENALTY AND ALLOWED THE ASSESSEES APPEAL. AGGRIEVED BY THE ORDER OF THE ITA NO 580 9/MUM/2019 LAB DEVICE INDIA PVT LTD., MUMBAI - 5 - CIT(A),THE REVENUE HAS FILED AN APPEAL WITH THE HONBLE TRIBUNAL. 4. AT THE TIME OF HEARING, THE LD. DR SUBMITTED THA T THE CIT(A) ERRED IN DELETING THE PENALTY, WHEREAS T HE A.O HAS RECEIVED THE INFORMATION THAT, THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS AND THE SAME COULD NOT BE OVERLOOKED AND PRAYED FOR ALLOWING THE REVENUE APPEAL. 5.CONTRA, THE LD.AR SUPPORTED THE ORDER OF THE CIT( A) AND PRAYED FOR DISMISS THE REVENUE APPEAL. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE CRUX OF THE DISPUTED ISSUE AS ENVISAGED BY THE LD. DR THAT THE CIT(A) HA S ERRED IN DELETING THE PENALTY OVERLOOKING THE FACTS OF BOGUS PURCHASES. WHEREAS, THE LD.CIT(A) CONSIDERING THE FACTS AND CIRCUMSTANCES OBSERVED THAT THE PENAL TY CANNOT BE LEVIED ON ESTIMATED INCOME. WE FIND THAT THE CIT(A) HAS ESTIMATED INCOME/ GROSS PROFIT@6% ON BOGUS PURCHASES. WE ARE OF THE OPINION THAT WHEN TH E ADDITION IS ON ESTIMATED BASIS, PENALTY U/S 271(1)( C) OF THE ACT CANNOT BE LEVIED ON SUCH ADHOC ESTIMATED INCOME. THE LD.DR COULD NOT CONTROVERT THE FINDINGS ITA NO 580 9/MUM/2019 LAB DEVICE INDIA PVT LTD., MUMBAI - 6 - OF THE CIT(A) WITH ANY NEW COGENT EVIDENCES OR INFORMATION. ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND UPHEL D THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE . 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.04.2021 SD/- SD/- (SHAMIM YAHYA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 01.04.2021 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. '#$%&&' , )* , / DR, ITAT, MUMBAI 6. %-./0 / GUARD FILE. / BY ORDER, '& //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT, MUMBA I